Drugs are being priced out of reach. The new web platform, Shareholder Democracy, will enable millions of Americans to “vote” on pending 2019 shareholder resolutions at six pharmaceutical companies. Shareholder Democracy Network and its drug-pricing ballot for stakeholders will be launched during a phone-based news conference at 1 p.m. ET/10 a.m. PT on Tuesday (February 12). Continue Reading →
Tag Archives | shareholders
Netflix Approach to Governance: Genuine Transparency with the Board (download) by David F. Larcker and Brian Tayan takes a look at one aspect of corporate governance at Netflix and finds “a radically different approach to information sharing” by management with the Board. Shareholders are largely left out of the equation.
Netflix Approach to Governance: Management
Netflix Approach to Governance has the appearance of a balanced look at how management shares information with the Board. There is no suggestion the approach can be widely copied. Says Larker,
I think it would be hard to put this type of system in place at older and more mature organizations. Innovative organizations that want and need the insights from board members can clearly adapt this type of approach. You need a CEO who wants a high level of discussion about strategy, etc., and is open to alternative points of view.
Transparency works at Netflix, at least in part, because CEO Reed Hastings understands board members would not have the confidence to make tough calls unless they have a better understanding of the company.
Transparency is hard to argue against, unless it leads to directors leaking information that reaches competitors. Larcker and Tayan interviewed CEO Reed Hastings and most of the board members. They describe two key features of what they appear to believe is remmanagement transparency.
Board members attend monthly and quarterly senior management meetings as observers. Communications to the board take the shape of approximately 30-page memos that are heavy on analysis and contain links to all relevant data on the company’s internal computer systems. (Another Netflix Disruption: A Transparent Board)
More frequent meetings with senior staff and more information allows Netflix directors to work more effectively, since they are better able to assess strategic developments. It is hard to tell what impact transparency is having on the company but,
Netflix has been enormously successful over the last five years. Revenues have nearly tripled, increasing to $11.69 billion from $4.4 billion at the end of 2013, while the market cap soared to $133 billion from $4.4 billion.
Directors like the approach.
The overall tone Reed has set, really from early days, is around transparency. … There is no editorializing. There’s no censorship.
It’s just a deep desire to hear rational, well-argued pros and cons of any decision.
No censorship and frank discussions between management and board; if other companies are not operating that way, why not? Equally important, why does that approach not carry through to the relationship between shareholders and the board?
Netflix Approach to Governance: Shareholders
Their research, part of the informative Stanford Closer Look Series, begins with the following sentence:
The hallmark of good corporate governance is an independent-minded board of directors to oversee management and represent the interests of shareholders.
The only other significant reference to shareholders comes later in the following sentence:
While fiduciary rules allow directors to rely exclusively on information provided by management, dynamics such as these can reduce the quality of that information and impair their ability to make good decisions on behalf of shareholders.
Even through the law allows directors to rely on what the CEO and other senior executives tell them, directors make better decisions when the company is more transparent – when they can observe meetings further down the chain and have more direct access to company relevant data. Yet, the Netflix approach to governance appears one-sided. Transparency and dialogue are missing when it comes to management and shareholders.
As I pointed out in a recent post, Netflix has repeatedly ignored shareholder votes. (Will Netflix Ignore Stockholders Again?) While proxy proposals are generally precatory, most companies implement those receiving a majority vote and often those that do not. The Netflix approach to governance appears to ignore proxy votes whenever legally possible.
- In 2014 a majority voted to declassify the board and to require a majority vote to elect directors.
- In 2015 similar proposals were voted and won. A majority of shareholders also voted against director Barton, who, although he lost, was up for reelection this year.
- In 2016 a majority of shares were voted in favor of proxy access, reducing supermajority vote requirements, and declassifying the board.
- In 2017 a majority of shares were voted in favor of proxy access, to declassify the board, to require a majority vote for electing directors and to eliminate all supermajority voting requirements. As far as I know, none of those proposals were implemented by the Board.
- In 2018 a majority of shares were voted in favor of the following:
- Reduce Ownership Threshold for Shareholders to Call Special Meeting (57%)
- Adopt Proxy Access Right (58%)
- Provide Right to Act by Written Consent (52%)
- Adopt Simple Majority Vote (85%)
- Amend Bylaws (72%) This was a binding proposal to require directors in uncontested elections to be elected by a majority of shares voted
Given the Netflix approach to governance with regard to shareholders, I expect the only proposal that will be adopted from this year is the binding proposal to require a majority vote in uncontested directors elections. The vote in favor surpassed the bylaw requirement of a two-thirds threshold.
Although I do not question the scholarship of Larcker and Tayan, their discussion of the Netflix approach to governance would benefit from an examination of shareholder relations with the board. We hope that is on their agenda for a closer look.
Netflix Approach to Governance: Other Views
- Netflix Shareholders Again Fail to Change Rules to Elect Board Members by Simple Majority Vote
- Consider Director Conduct at the 2018 Netflix annual meeting when you vote regarding directors in 2019
- Netflix Rejects Claims That Exec Bonuses Hurt Shareholders
- Netflix investors, once again, seek change in proxy access, voting rules
Standing Voting Instructions: Empowering the Excluded Retail Investor by Jill E Fisch just could be the most important article on corporate governance this year… if it is widely read and acted on. Download at ecgi, Penn Law or SSRN. The above photo is from Small Investors Support the Boards. But Few of Them Vote, The New York Times. Unfortunately, most will not bother to read the article. What follows is both and summary of main points and my commentary. Hopefully, this post will lead to reading the research and adding your voice to those petitioning the SEC to facilitate standing voting instructions. Continue Reading →
Peter Georgescu’s Capitalists Arise!: End Economic Inequality, Grow the Middle Class, Heal the Nation correctly identifies short-termism and a focus on stock price as a problem contributing to growing wealth inequality. His solutions depend on enlightened managers and boards to transform how America does business by taking all stakeholders into account, not just shareholders. I say, don’t count on enlightened self-interest by those now in control. They are unlikely to overturn the system that benefits them.
Transformation is not likely to come from those in power, even if it would be to the advantage of all. Transformation must be demanded from below. Any transformation system that purports to consider all stakeholders must effectively redistribute power. We cannot depend on benevolent dictatorships like Facebook’s Mark Zuckerberg or Alphabet’s Sergey Brin and Larry Page to act as if all stakeholders matter. To get where Georgescu correctly wants to go, there must be a real shift in power. Continue Reading →
Concerned Shareholders of Reeds: Formed
The Concerned Shareholders of Reeds, Inc., led by Edwin R. Lozano, today announced formation of a committee to rescue Reeds, Inc. The committee delivered an open letter to Reeds Founder/CEO/Chairman and the Reeds Board of Directors expressing significant concerns with the company’s poor financial performance, problematic corporate Governance practices and weak oversight. The Concerned Shareholders of Reeds believe immediate and meaningful change is required to ensure Reeds is being run in a manner consistent with the best interests of all shareholders. Although leaving open the possibility of negotiating with the Board, having been initially rebuffed, the letter indicates the Concerned Shareholders of Reeds, Inc. intends to commence a proxy contest by nominating a slate of highly qualified director candidates for the 2016 Annual Meeting.
Concerned Shareholders of Reeds: Breadsticks Anyone?
Directors Forum 2016 is a ‘must’ in an increasingly complex and volatile environment with expanding investor and stakeholder activism, geo-political unrest and 24/7 political campaigning, boards and management facing unprecedented demands. “Directors Forum 2016: Directors, Management & Shareholders in Dialogue,” hosted by Corporate Directors Forum on January 24-26, 2016, provides a forum for three constituencies who seldom share the stage – directors, shareholders and management (and regulators) – to express their divergent and sometimes contentious perspectives on these and other issues. Get the special corpgov.net discount when you Register. Use promo code: discount16. Continue Reading →
You are invited you to join us for the 2015 Millstein Governance Forum. This year’s Forum, the 10th annual hosted by the Millstein Center, will focus on The Board-Centric Model in the Array of Shareholders and will take place on Thursday, December 10, 2015 at Columbia University in New York. Continue Reading →
I don’t think we’ve gone back in time all year… too busy with proxy season. Join us as Mr. Peabody and Sherman prepare to go back in time to visit corpgov.net 5, 10 and 15 years ago. Yes, many links are broken. The world and the internet move on… still, it is worth a few minutes to reflect on where we’ve been.
Five years ago in Corporate Governance
Now that proxy season is finally winding down, I had a few minutes to take a quick glance at recent research reported on SSRN. Below I am simply including a few citations and abstracts of studies I might find useful in my own activities as a shareholder advocate in the US. I’m sure I included some that are strictly academic and missed many more that would be useful. I would welcome guest posts on such research from authors, critics or other interested parties. Please contact me via e-mail for by leaving comments below. I would welcome guest posts on such research from authors, critics or other interested parties. Please contact me via e-mail or by leaving comments below. Part 1; Part 2. Continue Reading →
Those of us involved in corporate governance issues for a living enjoy talking shop with others in the field. One reason, I suspect, it that it’s so damned difficult to explain corporate governance norms to people on the outside. “You mean CEOs pretty well select the very board members who set those CEOs’ pay and performance standards? How can I get a job like that?”…and so on. Continue Reading →
The Counsel of Institutional Investors (CII) took a very strong stand yesterday, asking Whole Foods Market to amend its proxy access proposal to conform with the “3 percent for three years” standard applicable to groups.
Whole Foods appears to have generated their proposal in direct response to mine in order to obtain a no-action letter from the SEC under Rule 14a-8(i)(9). As reported earlier, I appealed the SEC’s decision on Whole Foods to the full Commission. Continue Reading →
The July 2014 edition of Corporate Governance: An International Review contains four research papers, all dealing with firms outside the US and UK, which usually get most of the attention. Still, insights from these studies could help efforts around the globe, including the US and UK.
Monitoring in Japan
Most people don’t like their behavior criticized. CEOs and boards almost always fight my proxy proposals aimed at improving corporate governance. Likewise, I wasn’t happy with the Deal Professor’s criticisms of my shareowner activism in his August 19th NYTimes article, Grappling With the Cost of Corporate Gadflies, which also criticizes John Chevedden and William Steiner. I stewed for days but finally took the advice of a good friend, who is Assistant General Counsel & Corporate Secretary at a major company,
Better to be engaged than enraged!
If I had more time available, my response would have been shorter but I have a number of projects that demand attention. When I submit proposals, I want boards to weigh them carefully on the merits. I have tried to do that with the Deal Professor’s criticism. I hope our mutual use of hyperbole doesn’t preclude further engagement. Unlike the character in the cartoon at right, I feel no need to irritate… but I do often question mechanisms in corporate governance that isolate and concentrate power, rather than distributing it. I prefer structures that distribute power, making us of the wisdom found at all levels. Continue Reading →
Below is an email I sent to Pensions & Investments (P&I) editorial chief Barry Burr praising their editorial enhancing fiduciary duty and opining on how it may speed the arrival of the time when retail investors will vote their values with the simple push of a button or two on their cell phones. I will follow this tomorrow with some additional remarks regarding the advent of open client directed voting, assisted by this expanded fiduciary duty.
Thank you for your important editorial, Winning Over Proxy Voters, which argues that institutional investors have a fiduciary duty to announce their proxy votes in advance of annual meetings, if doing so is likely to influence voters.
Votes are assets. Announcing votes in advance of meetings puts the value of those assets to their full use; announcing votes after the meeting does not. Continue Reading →
EMC Corporation $EMC is one of the stocks in my portfolio. Their annual meeting is coming up on 4/30/2014. ProxyDemocracy.org had collected the votes of four funds when I checked and voted on 4/22/2014. I voted with management 13% of the time. View EMC’s Proxy Statement, which is user friendly. Continue Reading →
CorpGov.net publisher, James McRitchie presents proposal #5 for the 2014 annual meeting of shareowners, which requests the Board of The Coca-Cola Company move prospectively to an independent board chair.
To see how I voted on the rest of the issues, click on The Coca-Cola Company (KO): How I Voted – Proxy Score 63 – Things Go Better With a Split CEO/Chair.
BlackRock (NYSE:BLK) and the National Association of Corporate Directors (NACD) have issued a call for papers that address global governance challenges. Academics and governance practitioners are invited to submit original papers focused on emerging issues and opportunities likely to impact boardrooms and/or shareholders over the next decade. Continue Reading →
Guest Post: Miguel Carrasco – Managing Director and proxy solicitation consultant at Proxycensus Ltd specializing in issues relating to information transmittal, social media technology in IR and the technicalities of the cross border voting process.
CorpGov.net publisher/shareowner activist, James McRitchie in the news.
- Shareholders push for more say over board members (WSJ’s MarketWatch), on proxy access proposals at Bank of America, Citigroup and Goldman Sachs.
- Sued again for daring to file proxy proposals, EMC sues shareholder activists over bid to separate CEO, chairman roles (Boston Business Journal). They lost their ‘no-action’ request with the SEC. Now they are trying to get me to spend more than it is worth defending my proposal. Continue Reading →
The UBC Faculty of Law welcomed its fourth Fasken Martineau Visiting Senior Scholar, Professor Margaret Blair. Professor Blair is an economist who focuses on management law and finance. Her current research focuses on five areas: team production and the legal structure of business organizations, legal issues in the governance of supply chains, the role of private sector governance arrangements in contract enforcement, the legal concept of corporate “personhood,” the historical treatment of corporations by the Supreme Court, and the problem of excessive leverage in financial markets.
Webcast sponsored by the Irving K. Barber Learning Centre and hosted by the Faculty of Law at the University of British Columbia. It has become part of the accepted corporate governance wisdom in the U.S., as well as in numerous other countries, that boards of directors of publicly-traded corporations Continue Reading →
Many of us free ride on actions taken by active, long-term shareholders. These unsung heroes goad managers and boards to reach better decisions, make available desirable employment opportunities and, overall, push them to act like good corporate citizens. These active investors accomplish these things by talking to companies, preparing proxy proposals for all shareholders to consider, and offering recommendations on director elections and company-sponsored proxy measures.
Ralph Ward digs past the standard bullshit in his 2014 Boardroom Insider. Always plenty to chew on in a few short pages. Here’s a tidbit, which I hope will leave you wanting more, which includes more tips than you’ll find in pages and pages of other publications aimed at directors. Continue Reading →
One way to use Sharegate is to announce your proxy votes. Far too many retail shareowners just trash their proxies instead of using them. A common misconception is that shareowners should take the Wall Street Walk and sell if they are displeased with any aspect of a company they own. That is like saying you should pack up and move out of the neighborhood if you think there should be a stop sign at the end of the block. Continue Reading →
I have a ‘no-action’ request by Apple on my desk. They are fighting my attempt to include consideration of a proxy access proposal at their next annual meeting. Like most no-action requests to the SEC, this one is full of dry uninspired attempts to raise procedural minutiae as a basis for exclusion. Also sitting on my desk is the latest issue of Directors&Boards with the following sentence in huge type on the cover: Should You Serve on an Activist’s Slate?”
That looks a lot more interesting. Apple can wait. Won’t it be nice, I think, when boards welcome proxy access, the new ideas and candidates that are likely to follow? Let’s see what they have to say at Directors&Boards. Continue Reading →
Citizens DisUnited: Passive Investors, Drone CEOs, and the Corporate Capture of the American Dream both delights and informs as only Robert A.G. Monks can. No one else writes so well about topics like “How CEOs and the Business Roundtable Hijacked the World’s Greatest Wealth Machine” and those in the current volume because no one else has been as engaged in corporate governance as Monks with such depth from so many angles.
A serial entrepreneur, public official, director, prolific author and long-time agitator, his lifework has been delineating the underlying dynamics of corporate power and devising system that integrate wealth creation with the interests of society. Citizens DisUnited is a clear call to action. I hope my review advances that call by emphasizing the need for every investor, every citizen to get involved. Continue Reading →
Corporate Governance was founded in 1995 and we have never run a contest… until now. Announcing the Foxhole of the Year Award for the company that makes it the most difficult for shareowners turn up at their annual meeting.
Our first nomination came from John Chevedden for FirstEnergy (NYSE:FE). According to the $17 billion company:
You are invited to attend the 2013 FirstEnergy Corp. Annual Meeting of Shareholders at 8:00 a.m., Eastern time, on Tuesday, May 21, 2013, at the Waterfront Place Hotel, Two Waterfront Place, Morgantown, WV 26501. Continue Reading →
Tomorrow’s Corporation that We Need Today: Getting there from here. David Langstaff, president and CEO of TASC Inc., discusses why understanding the purpose of the corporation is so important and suggests next steps. March 7, 2013. Continue Reading →
I’m not endorsing their activities, I’m just passing on a press release from creative groups whose tactics are much more unconventional than mine. I think of them like The Onion, but with more of a social message… although I’m not very familiar with their work. I searched the term “shareholders” on Actipedia.org and came up with three cases; nothing under “corporate governance” or “proxy access,” so relevance may be thin for readers of Corporate Governance (CorpGov.net). Still, you never know what’s ahead without looking.
NYSE Euronext, NIRI (National Investor Relations Institute) and the Society (Society of Corporate Secretaries & Governance Professionals) submitted a joint petition to the SEC requesting the SEC to reduce the time frame under which investors are required to report their holdings from 45 business days after the end of the quarter to two business days after the end of the quarter. Currently, the Exchange Act requires quarterly reporting, so a further reduction than quarterly reporting would require an act of Congress. Continue Reading →
CalSTRS announced its vote at the March 6, 2013, Walt Disney Company annual shareholder meeting. CalSTRS voted against several directors and management proposals, and voted for shareholder proposals to allow proxy access and separate the CEO and chairman positions. What is significant about the announcement is that it went over each director candidate and issue on the ballot and not only disclosed how CalSTRS voted but why. Here’s the thrust of their press release. Continue Reading →
Below are some relatively quick notes I took at the Corporate Directors Forum 2013, held on the beautiful campus of the University of San Diego, January 27-29, 2013. See materials, Corporate Directors Forum 2013: Bonus Session, and Corporate Directors Forum 2013 – Day 1, Part 1.
The program was subject to the Chatham House Rule, so there will be little in the way of attribution below but I hope to provide some sense of the discussion. I throw in a lot of opinions. Some are those of panelists, some are mine, and some came from the audience. I still get a little lost in some of the financial discussions but think we need to raise public understanding, so I don’t shy away from trying to learn or from offering opinions. I had fun, learned from various perspectives, renewed acquaintances and made some new ones. If corporate governance is your thing, I hope to see you there in 2014. Continue Reading →